We are often told customer service is key to attracting and retaining customers. But, for banks whose legacy systems prevent them matching their products’ capabilities to the rapidly-changing needs of their customers, the line between good customer service and a good product offering is often surprisingly fuzzy, writes Nanda Kumar
In the UK, the government-backed current account switch service has, in theory, made it much easier to tell what customers really value. After six months, some think ‘the jury is still out’. For others the answer is clear. There is, so far, little correlation between customer satisfaction and customer acquisition success. Not to say customer service is irrelevant.
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In fact, I would argue the opposite – but the majority of retail products offered by UK banks are simply so far away from the ideal solution their customers expect, that customers are prepared to sacrifice a decent customer experience for a product which approximately fits their requirements.
That is not an ideal position for a consumer-facing industry to find itself in, and UK and European banks find themselves in danger of being outmanoeuvred by disruptive new entrants to the market. Non-bank players such as Facebook, with access to more accurate customer data and more flexible IT infrastructure, are queuing up to attract customers to their finance offerings.
In my view, the banking industry can defend itself if it takes a leaf out of the telecoms industry’s play book, and moves to a relationship based pricing model. To be successful, this will one which take in all facets of the market, from low end private banking and mass affluence services, right down to the underbanked and underserved sections of the population.
This will require banks to move quickly, and a strategy focused on core banking systems cannot facilitate that. The new generation of core banking systems may offer relationship based pricing as a standard feature – but core banking replacement itself is such a lengthy and convoluted process that it simply does not offer a realistic alternative for banks looking to rapidly develop a more customer-centric product portfolio.
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By GlobalDataInstead, a middleware solution bridging the gap between old and new systems can go a long way towards giving a batch based core system genuine real-time capabilities – the cornerstone of a relationship based model. Such systems can elevate legacy banks to the level of agility and insight enjoyed by the giants of the digital world, and still leave the flexibility to absorb other systems that might be acquired through M & A activity, or to comply with new or unexpected regulatory changes.
A solution constructed on top of existing (and probably antiquated), core systems, as successfully implemented by many telcos, has one other clear advantage, namely that it can take account of the changing patterns of spending, finance and information that today’s consumers have, and is able to change as customers change.
The truth about today’s retail banking market is that there are no ‘typical consumer and hence, no ‘typical bundle’ of products which can be sold to them. The infinite level of personalisation offered by the ‘web scale’ giants of the business world reflects this, and banks should aspire to this standard.
New technology means that the level of visibility this requires can be achieved without a complete rebuild of IT architecture.
urthermore, the accuracy of risk assessment that such visibility affords means that a much wider of variety of banking services can be offered – safely and profitably – to a wider variety of customers than has been possible in the past.
If banks can take advantage of this opportunity, then their superior skills and knowledge should help them see off the pretenders in the industry.
Nanda Kumar is CEO of SunTec
